Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, May 24, 1990 TAG: 9005240632
SECTION: NATIONAL/INTERNATIONAL PAGE: A/8 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
But some Democratic critics are questioning why it took so long to come up with an accurate figure and wonder why the government isn't doing more to prosecute the high-flyers who created the mess in the first place.
The administration also left unanswered how to pay for the higher bailout cost, leaving that question for the current round of budget negotiations. Congressional and administration budget-writers are looking for ways to reduce next year's federal deficit to the $64 billion required by the Gramm-Rudman deficit reduction law.
Responding to demands for better figures on the S&L issue, the administration on Wednesday released a new estimate that the government will need to borrow between $90 billion and $130 billion to clean up the S&L mess.
The exploding costs of the S&L bailout were one of the principal reasons the administration was forced to call for the budget negotiations in the first place.
The revised estimate marked the first time the administration acknowledged that the $50 billion in borrowing authority included in last year's massive S&L bailout bill would not be enough.
Private analysts who follow the S&L industry generally agreed with the new figure, although it omits interest costs from the equation. When borrowing costs are added, the ultimate price of the bailout over 40 years is likely to top $300 billion.
"The administration is to be commended for producing much more realistic and candid numbers than they did 15 months ago," said Bert Ely, an Alexandria, Va., savings and loan analyst who formerly worked in Roanoke, Va.
Treasury Secretary Nicholas Brady, who presented the administration's new assessment, blamed 90 percent of the higher cost on a de- S&L scrutiny to intensify. B7 pressed real estate market, where S&Ls have most of their loans.
"We are dealing with a moving target, made greatly more expensive by a weakening real estate market and constantly changing economic conditions," Brady said.
However, Robert Litan of the Brookings Institution discounted Brady's explanation, contending, "The fact is they made a mistake. They low-balled it."
Some Democratic critics contended the new estimate showed that the administration was not moving quickly enough to close sick S&Ls.
Rep. Charles Schumer, D-N.Y., warned that without prompt action "the crisis will get worse."
But Rep. Jim Leach, R-Iowa, called the new estimate "an enormous step toward a reflection of greater reality. . . . For the first time, we have a government statistic that I believe has certain credibility to it."
Rep. Byron Dorgan, D-N.D., faulted the administration for not doing enough to prosecute S&L operators who squandered depositors' funds through fraudulent loan practices.
In an effort to respond to criticism that criminal prosecutions have lagged, Timothy Ryan, the new head of the Office of Thrift Supervision, told reporters Wednesday that financial regulators were working to get the worst criminal cases forwarded to prosecutors, sending 20 cases to the Justice Department in recent weeks with another 100 cases being prepared.
by CNB